To start any business in any country you need to invest your money first. This money that shareholders invest in order to start or expand the business is called share capital. In the UAE, each registration authority determines the minimum amount of required share capital independently. The maximum amount of share capital is usually not set, as such you are allowed to decide on your own, how big share capital of your company will be.
Since each registration authority sets its own share capital minimum, there is no universal answer, as to how much exactly you will have to deposit into your company’s bank account. This will depend on where your company is registered.
It is also not only the amount of share capital that differs from one registration authority to another. All registration authorities have their own rules in terms of depositing of this capital into company’s bank account. While some of them want to see that you have this money and you will need to deposit it and provide respective proof in the form of a stamped bank statement or a Share Capital Certificate, others will not require any confirmations and the share capital will be just mentioned in the corporate documents.
Let’s summarize these two important points: each authority has its own requirements with respect to company’s minimum share capital and the capital may need to be deposited into company’s corporate bank account or may not.
There are free zone authorities in the UAE that allow to state the share capital of as little as AED 1,000 only. There are also free zones that have a minimum share capital requirement of AED 185,000 or even AED 300,000. Some of the free zones also require a minimum share capital of AED 1,000,000 for General Trading companies. As far as depositing of share capital into company’s bank account is concerned, most Dubai registration authorities require this. The average share capital requirement in Dubai is AED 50,000, which is approximately USD 13,000. Depositing of share capital usually takes place either amidst company formation process or once the company is registered. However, there are still a few free zones in Dubai, where depositing of share capital at the time of company formation is not required. Dubai South free zone (formerly known as Dubai World Central) is one of those. In northern emirates most of the time depositing of share capital into company’s bank account is not required. We also remember some registration authorities changing their share capital requirements. This was done in an attempt to attract more investors for setting up their businesses in that particular free zones.
But where is the share capital of the company usually mentioned? It is stated in corporate documents of the company, such as Memorandum of Association, Share Certificate, Certificate of Incumbency and sometimes in company’s license.
But what if you want to register a company in a free zone, where depositing of share capital is required. Does it mean that share capital amount will be frozen and you will not be able to use these funds, unless your company is liquidated? Luckily this will be not the case. We know that, yes, in some countries this is the practice, to freeze share capital funds until company ceases it existence. In the UAE, the practice is not that strict. You are allowed to dispose of funds as you deem fit, once company registration is completed and you have proven to the relevant registration authority that funds are in company’s bank account. As such, you are free to use funds for any company’s operational needs.
Another question that comes along with freezing of share capital amount is how to deposit this share capital? Please note that no one will provide you with clear-cut guidelines on how to do it. You may have your personal finances and may want to transfer funds from your personal account to your company’s corporate account. Or you may want to deposit share capital through the banks’ branch in cash, if your company is still under formation. You might have a business in a different country that belongs to you and you want to transfer funds from your company’s account in that country. The key is to get these funds into your company’s corporate account.
Now let’s talk about which other aspects of company’s operations share capital is linked to. Very often registration authorities link the same to your ability as a shareholder to apply for a UAE resident visa. What does it mean? It means, if you want to receive a resident visa as a shareholder you need to hold a certain number of shares totaling to a particular share capital amount. There are free zones, which want you to hold a minimum AED 50,000 or 50 shares. Also there are those, which require at least AED 75,000 out of total of AED 300,000, or 75 shares. The benefit of getting a resident visa as a shareholder is to save time and money on legalization of your diploma from a home country. As a shareholder you can provide a share certificate to immigration authority instead of legalized educational certificate. If a legalized diploma is not a problem and you can provide the same, do not worry about share capital, as you will be able to apply for your UAE resident visa as an employee of your newly established company. Also recently some of the free zones started offering assistance with dependent visas. As a result, certain requirements towards shareholders were introduced: again a shareholder needs to hold a certain amount of share capital to be able to resort to assistance of free zone with dependent visas. As such, even though share capital amount sometimes seems to be just numbers in your corporate documents, take into consideration that information that we just shared with you.
We would also like to recommend you to structure your company’s share capital in such manner, that would allow to introduce any new partners into company’s structure later. Say, your share capital of the company is AED 50,000, where you own all 50 shares with value of AED 1,000 each. From the start you knew, that you would want to introduce three more partners later, for example, in 2 years. All of you four should have equal number of shares then, but you will be not able to split shares equally. You will need first to increase share capital and deposit it into bank account (if this is required by registration authority) and only then proceed with share transfer. Each change in company’s structure is associated with certain fees registration authority applies. As such, if from the start you have clear plans with respect to company’s structure, state the share capital and deposit respective share capital amount, that would allow you for a greater degree of flexibility later.
I think in this chapter we covered almost all possible aspects of company’s share capital. You now have a clear understanding as to what questions you need to ask registration authority and pay attention to.
If you want to know more about Dubai freezone company formation, feel free to get in touch with our professional consultant team and we would be delighted to assist you and help you to compare Dubai freezone company setup costs and help you to find that free zone, which would suit your business needs the most.
Disclaimer: Business Boutique UAE-Consultants.com is not affiliated with any particular government or legal entity. Business Boutique does not give professional legal advice nor any other professional advice subject to a public office in the government. This article merely sets out a simple and basic idea as to the reasons of Dubai freezone company setup and Dubai free zone company formation cost. Business Boutique in no way holds nor imposes any official governmental or legal authority and the article herein is only to be taken as a guide. All further governmental or legal issues should be addressed to the corresponding authorities.
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